1 Tom Peters How New Business Works Rules for Re-invention 01.29.2003 2If you dont like change, youre going to like irrelevance even less. General Eric Shinseki, Chief of Staff, U. S. Army 3Sequenom/David Ewing Duncan/Wired11.02 Sequenom has industrialized the SNP single nucleotide polymorphisms identification process. This, Im told, is the first time a healthy human has ever been screened for the full gamut of genetic-disease markers. On the horizon multi-disease gene kits, available at WalMart, as easy to use as home-pregnancy tests. You cant look at humanity separate from machines were so intertwined were almost the same species, and the difference is getting smaller. 4There will be more confusion in the business world in the next decade than in any decade in history. And the current pace of change will only accelerate. Steve Case 5IT MAY SOMEDAY BE SAID THAT THE 21ST CENTURY BEGAN ON SEPTEMBER 11, 2001. Al-Qaeda represents a new and profoundly dangerous kind of organizationone that might be called a virtual state. On September 11 a virtual state proved that modern societies are vulnerable as never before.Time/09.09.2002 6The deadliest strength of Americas new adversaries is their very fluidity, Defense Secretary Donald Rumsfeld believes. Terrorist networks, unburdened by fixed borders, headquarters or conventional forces, are free to study the way this nation responds to threats and adapt themselves to prepare for what Mr. Rumsfeld is certain will be another attack. Business as usual wont do it, he said. His answer is to develop swifter, more lethal ways to fight. Big institutions arent swift on their feet in adapting but rather ponderous and clumsy and slow. The New York Times/09.04.2002 7 From Weapon v. Weapon To Org structure v. Org structure 8Our military structure today is essentially one developed and designed by Napoleon. Admiral Bill Owens, former Vice Chairman, Joint Chiefs of Staff 9The organizations we created have become tyrants. They have taken control, holding us fettered, creating barriers that hinder rather than help our businesses. The lines that we drew on our neat organizational diagrams have turned into walls that no one can scale or penetrate or even peer over. Frank Lekanne Deprez René Tissen, Zero Space Moving Beyond Organizational Limits. 10In an era when terrorists use satellite phones and encrypted email, US gatekeepers stand armed against them with pencils and paperwork, and archaic computer systems that dont talk to each other. Boston Globe (09.30.2001) 11Dawn Meyerreicks, CTO of the Defense Intelligence Systems Agency, made one of the most fateful military calls of the 21st century. After 9/11 her office quickly leased all the available transponders covering Central Asia. The implications should change everything about U.S. military thinking in the years ahead. The U.S. Air Force had kicked off its fight against the Taliban with an ineffective bombing campaign, and Washington was anguishing over whether to send in a few Army divisions. Donald Rumsfeld told Gen. Tommy Franks to give the initiative to 250 Special Forces already on the ground. They used satellite phones, Predator surveillance drones, and GPS- and laser-based targeting systems to make the air strikes brutally effective. In effect, they Napsterized the battlefield by cutting out the middlemen (much of the militarys command and control) and working directly with the real players. The data came in so fast that HQ revised operating procedures to allow intelligence analysts and attack planners to work directly together. Their favorite tool, incidentally, was instant messaging over a secure network.Ned Desmond/Broadbands New Killer App/Business 2.0/ OCT2002 12A Big Electronics Show Is All About Connections headline, New York Times/ 01.13.2003/ Consumer Electronics Show gt COMDEX 13NOKIA Connecting People 14SOS Emergency Agencies Often Unable to Talk to Each Other headline, p1, USA Today/11.20.2002 15Our entire facility is digital. No paper, no film, no medical records. Nothing. And its all integratedfrom the lab to X-ray to records to physician order entry. Patients dont have to wait for anything. The information from the physicians office is in registration and vice versa. The referring physician is immediately sent an email telling him his patient has shown up. Its wireless in-house. We have 800 notebook computers that are wireless. Physicians can walk around with a computer thats pre-programmed. If the physician wants, well go out and wire their house so they can sit on the couch and connect to the network. They can review a chart from 100 miles away.David Veillette, CEO, Indiana Heart Hospital (Healthleaders/12.2002) 16If early soldiers idealized Napoleon or Patton, network-centric warriors admire WalMart, where point-of-sale-scanners share information on a near real-time basis with suppliers and also produce data that is mined to help leaders develop new strategic or tactical plans. WalMart is an example of translating information into competitive advantage.Tom Stewart, Business 2.0 17The New Infantry Battalion/ New York Times/12.01.2002 Pentagons Urgent Search for Speed. 270 soldiers (1/3rd normal complement) 140 robotic off-road armored trucks. Every soldier is a sensor. Revolutionary capabilities. Find-to-hit 45 minutes to 15 minutes in just one year. 18 Erics Army Flat. Fast. Agile. Adaptable. Light But Lethal. Brand You/ Talent/ I Am An ARMY Of One. Info-intense. Network-centric. 19The New Infantry Battalion/ New York Times/12.01.2002 Pentagons Urgent Search for Speed. 270 soldiers (1/3rd normal complement) 140 robotic off-road armored trucks. Every soldier is a sensor. Revolutionary capabilities. Find-to-hit 45 minutes to 15 minutes in just one year. 20Uncertainty We dont know when things will get back to normal. Ambiguity We no longer know what normal means. 21 I Believe 1. Change will accelerate. DRAMATICALLY. 2. We will RE-INVENT THE WORLD IN THE NEXT TWO GENERATIONS. (Business Health Care Politics War Education Fundamentals of Human Interaction.) 3. OPPORTUNITIES are matchless. 4. You are either ON THE BUS or OFF THE BUS. 5. I WANT TO PLAY! AND YOU? 22I. NEW BUSINESS. NEW CONTEXT. 23All Bets Are Off. 24lt1000A.D. paradigm shift 1000s of years 1000 100 years for paradigm shift 1800s gt prior 900 years 1900s 1st 20 years gt 1800s 2000 10 years for paradigm shift 21st century 1000X tech change than 20th century (the Singularity, a merger between humans and computers that is so rapid and profound it represents a rupture in the fabric of human history) Ray Kurzweil 25Vernor Vinge/Mr. Singularity The transition time from human history to post-human singularity time, Vinge thinks, will be astonishingly shortmaybe one hundred hours from the first moment of computer self-awareness to computer world conquest.Esquire/12.2002 26We are at a pivotal point in history. We are at one of a half dozen turning points that have fundamentally changed the way societies are organized for governance. Philip Bobbitt, The Shield of Achilles War, Peace, and the Course of History 27 Theres going to be a fundamental change in the global economy unlike anything we have had since the cavemen began bartering. Arnold Baker, Chief Economist, Sandia National Laboratories 28NOW THATS B-I-G! The period 2000-2002 will bring the single greatest change in worldwide economic and business conditions since we came down from the trees. David Schneider Grady Means, MetaCapitalism 29In 25 years, youll probably be able to get the sum total of all human knowledge on a personal device. Greg Blonder, VC was Chief Technical Adviser for Corporate Strategy _at_ ATT Barrons 11.13.2000 30I genuinely believe we are living through the greatest intellectual moment in history. Matt Ridley, Genome 31Doctors are faced with the very real threat of irrelevance in ten years. Youll go to a lab, have a blood sample drawn, and a readout of your genetic deficiencies will be producedalong with Doctors Orders for appropriate treatment only there wont be any doctor. Leading Pediatric Cardiologist (11.2002) 32Yo, Bioinformatics! Researchers say they have found a way to mate human cells with circuitry in a bionic chip The tiny device smaller and thinner than a strand of hair combines a healthy human cell with an electronic circuitry chip. AP/AOL/02-00 33Help! Theres nobody in the cockpit. In the future, will the airlines no longer need pilots? Grumman Global Hawk/ 24 hours/ Edwards to South Australia Source The Economist/12.21.2002 34We are in a brawl with no rules. Paul Allaire 35S.A.V. 36Strategy meetings held once or twice a year to Strategy meetings needed several times a week Source New York Times on Meg Whitman/eBay 37 2. The Destruction Imperative. 38It is generally much easier to kill an organization than change it substantially. Kevin Kelly, Out of Control 39C.E.O. to C.D.O. 40Facing Crisis, Media Giants Scrounge for Fresh Strategies headline, P1, Wall Street Journal/ 01.14.2003 41We must not only transform our armed forces but the Defense Department that serves themby encouraging a culture of creativity and intelligent risktaking. We must promote a more entrepreneurial approach one that encourages people to be proactive, not reactive, and to behave less like bureaucrats and more like venture capitalists one that does not wait for threats to emerge and be validated, but rather anticipates them before they appear and develops new capabilities to dissuade them and deter them. Donald Rumsfeld, Foreign Affairs 42Wealth in this new regime flows directly from innovation, not optimization. That is, wealth is not gained by perfecting the known, but by imperfectly seizing the unknown. Kevin Kelly, New Rules for the New Economy 43Analysts said we dont care about revenue, just give us the bottom line. They preferred cost cutting, as long as they could see 2 or 3 years of EPS growth. I preached revenue and the analysts eyes would glaze over. Now revenue is in because so many got caught, and earnings went to hell. They said, Oh my gosh, you need revenues to grow earnings over time. Well, Duh! Dick Kovacevich, Wells Fargo (in ABA Banking Journal) 44Forbes100 from 1917 to 1987 39 members of the Class of 17 were alive in 87 18 in 87 F100 18 F100 survivors underperformed the market by 20 just 2 (2), GE Kodak, outperformed the market 1917 to 1987. SP 500 from 1957 to 1997 74 members of the Class of 57 were alive in 97 12 (2.4) of 500 outperformed the market from 1957 to 1997. Source Dick Foster Sarah Kaplan, Creative Destruction Why Companies That Are Built to Last Underperform the Market 45Mr. Foster and his McKinsey colleagues collected detailed performance data stretching back 40 years for 1,000 U.S. companies. They found that none of the long-term survivors managed to outperform the market. Worse, the longer companies had been in the database, the worse they did.Financial Times/11.28.2002 46Its just a fact Survivors underperform. Dick Foster 47Good management was the most powerful reason leading firms failed to stay atop their industries. Precisely because these firms listened to their customers, invested aggressively in technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership. Clayton Christensen, The Innovators Dilemma 48ForgetgtLearn The problem is never how to get new, innovative thoughts into your mind, but how to get the old ones out. Dee Hock 49When asked to name just one big merger that had lived up to expectations, Leon Cooperman, former cochairman of Goldman Sachs Investment Policy Committee, answered Im sure there are success stories out there, but at this moment I draw a blank. Mark Sirower, The Synergy Trap 50Conglomerates dont work James Surowiecki, The New Yorker (07.01,2002) 51MERGERS Why Most Big Deals Dont Pay Off. A BusinessWeek analysis shows that 61 of buyers destroyed shareholder wealth. BusinessWeek/10.14.2002 52I believe large research organizations are less transparent, with less communication and more bureaucracy and it is more difficult and problematic to produce innovations in large institutions.Franz Humer, CEO, Roche 53Way to Go, Guys 2002 write downs from recent acquisitions 541,000, 000,000, 000 1 trillion (Source Harpers Index 04.2002) 55 Acquisitions are about buying market share. Our challenge is to create markets. There is a big difference. Peter Job, CEO, Reuters 56Active mutators in placid times tend to die off. They are selected against. Reluctant mutators in quickly changing times are also selected against. Carl Sagan Ann Druyan, Shadows of Forgotten Ancestors 57Lessons from the Bees! Since merger mania is now the rage, what lessons can the bees teach us? A simple one Merging is not in nature. Natures process is the exact opposite one of growth, fragmentation and dispersal. There is no megalomania, no merging for mergings sake. The point is that unlike corporations, which just get bigger, bee colonies know when the time has come to split up into smaller colonies which can grow value faster. What the bees are telling us is that the corporate world has got it all wrong. David Lascelles, Co-director of The Centre for the Study of Financial Innovation UK 58 TP on Acquisitions 1. Big Big Disaster. (Statistically.) (There are exceptions e.g., Citigroup.) 2. Big (GE, Cisco, Omnicon) acquires small/specialist Good if you can retain Top Talent. 3. Odds on achieving projected synergies among Mixed Big cultures 10. 4. Max Scale Advantages are achieved at a smaller size than imagined. 5. Attacked by Big, Mediocre Medium marries Mediocre Medium to bulk up. Result Big Mediocrity or worse. 6. Any sizeif Great Focusedcan win, locally or globally. 7. Increasingly, Alliances deliver more value than mergers and clearly abet flexibility. 59CEOs appointed after 1985 are 3X more likely to be fired than CEOs appointed before 1985 Warren Bennis, MIT Sloan Management Review 60The New Ge Way DYB.com 61Top-performing Companies Extremely contentious boards that regard dissent as an obligation and that treat no subject as undiscussable Jeffrey Sonnenfeld, Yale School of Management 62Change the rules before somebody else does. Ralph Seferian, VP, Oracle 63Most of our predictions are based on very linear thinking. Thats why they will most likely be wrong. Vinod Khosla, in GIGATRENDS, Wired 04.01 64The Gales of Creative Destruction 29M -44M 73M 4M 4M - 0M 65The secret of fast progress is inefficiency, fast and furious and numerous failures. Kevin Kelly 66RM A lot of companies in the Valley fail. RN Maybe not enough fail. RM What do you mean by that? RN Whenever you fail, it means youre trying new things. Source Fast Company 67The Silicon Valley of today is built less atop the spires of earlier triumphs than upon the rubble of earlier debacles.Newsweek/ Paul Saffo (03.02) 68Silicon Valley Success Failure? Secrets Pursuit of risk 4 of 20 in V.C. portfolio go bust 6 lose money 6 do okay 3 do well 1 hits the jackpot Source The Economist 69Axiom (Hypothesis) We have been screwed by Benchmarking Best Practice C.I./Kaizen. Axiom (Hypothesis) We need Masters of Discontinuity/ Masters of Ambiguity in discontinuous/ambiguous times. 70In the modern military, risk is anathema to rising stars, who cannot afford any slip-ups on their records. Zero defects and zero tolerance are common bywords.Newsweek/09.16.02 71Organize for performance customer satisfaction. Disorganize for renewal innovation. 72Rumsfeld values mavericks and tries to protect and promote them. Newsweek/ 09.16.02 73Rose gardeners face a choice every spring how to prune our roses. The long-term fate of a rose garden depends on this decision. If you want to have the largest and most glorious roses of the neighborhood, you will prune hard. You will reduce each rose plant to a maximum of three stems. This represents a policy of low tolerance and tight control. You force the plant to make the maximum use of its available resources, by putting them into the the roses core business. However, if this is an unlucky year late frost, deer, green-fly invasion, you may lose the main stems or the whole plant! Pruning hard is a dangerous policy in an unpredictable environment. Thus, if you are in a spot where you know nature may play tricks on you, you may opt for a policy of high tolerance. You will leave more stems on the plant. You will never have the biggest roses, but you have a much-enhanced chance of having roses every year. You will achieve a gradual renewal of the plant. In short, tolerant pruning achieves two ends (1) It makes it easier to cope with unexpected environmental changes. (2) It leads to a continuous restructuring of the plant. The policy of tolerance admittedly wastes resourcesthe extra buds drain away nutrients from the main stem. But in an unpredictable environment, this policy of tolerance makes the rose healthier. Tolerance of internal weakness, ironically, allows the rose to be stronger in the long run.Arie De Geus, The Living Company 74Japans Science Gap Rice farming culture uniqueness suppressed. Govt control of R D. Promotion based on seniority. Consensus vs. debate. (U.S. friends can be mortal enemies.) Bias for C.I. vs. bold leaps. Lack of competition and critical evaluation (peer review). Syukuro Manabe What we need to create is job insecurity rather than security to make people compete more. Hideki Shirakawa, Nobel laureate, chemistry 75December 2000 Swiss House for Advanced Research Education. Cambridge, Massachusetts. Xavier Comtesse You never hear a Swiss say, I want to change the world. We need to take more risks. 76The Word(s) on Vitality Gary Hamel Sell By jettison old crap Spin Out support entrepreneurs Spin In buy young firms 77No Wiggle Room! Incrementalism is innovations worst enemy. Nicholas Negroponte 78Just Say No I dont intend to be known as the King of the Tinkerers. CEO, large financial services company (New York, 5-99) 79Jim Tom. Joined at the hip. Not. 80Huh? Quiet, workmanlike, stoic leaders bring about the big transformations.--JC 81Pastels? T. Paine/P. Henry/A. Hamilton/T. Jefferson/B. Franklin A. Lincoln/U. S. Grant/W. T. Sherman TR/FDR/LBJ/RR/JFK M.L. King C. de Gaulle M. Gandhi W. Churchill M. Thatcher Picasso Mozart Copernicus/Newton/Einstein J. Welch/L. Gerstner/L. Ellison/B. Gates/S. Ballmer/S. Jobs/S. McNealy A. Carnegie/J. P. Morgan/H. Ford/J.D. Rockefeller/T. A. Edison 82Jim Collins vs. Michael Maccoby quiet, workmanlike, stoic vs. larger-than-life leaders/ egoists, charmers, risk-takers with big visions Carnegie, Rockefeller, Edison, Ford, Welch, Jobs, Gates 83But what if former head of strategic planning at Royal Dutch Shell Arie De Geus is wrong in suggesting, in The Living Company, that firms should aspire to live forever? Greatness is fleeting and, for corporations, it will become ever more fleeting. The ultimate aim of a business organization, an artist, an athlete or a stockbroker may be to explode in a dramatic frenzy of value creation during a short space of time, rather than to live forever. Kjell Nordström and Jonas Ridderstråle, Funky Business 84Built to Last v. Built to Flip The problem with Built to Last is that its a romantic notion. Large companies are incapable of ongoing innovation, of ongoing flexibility. Increasingly, successful businesses will be ephemeral. They will be built to yield something of value and once that value has been exhausted, they will vanish. Fast Company (03-00) 85The Futility of Size Virtualization is the recognition that territorial size does not solve economic problems. Economic access must become the substitute for increasing domain. Richard Rosecrance, The Rise of the Virtual State 86In Italy for 30 years under the Borgias they had warfare, terror, murder, bloodshedand produced Michelangelo, da Vinci and the Renaissance. In Switzerland they had brotherly love, 500 years of democracy and peace, and what did they producethe cuckoo clock. Orson Welles, as Harry Lime, in The Third Man 87Warren Bennis Patricia Ward Biederman/ Organizing Genius Great Groups Dont Last Very Long! 88 W.A. Mozart 1756 1791 HE CHANGED THE WORLD AND ENRICHED HUMANITY 89The corporation as we know it, which is now 120 years old, is not likely to survive the next 25 years. Legally and financially, yes, but not structurally and economically. Peter Drucker, Business 2.0 (08.00) 90The difficulties arise from the inherent conflict between the need to control existing operations and the need to create the kind of environment that will permit new ideas to flourishand old ones to die a timely death. We believe that most corporations will find it impossible to match or outperform the market without abandoning the assumption of continuity. The current apocalypsethe transition from a state of continuity to state of discontinuityHas the same suddenness as the trauma that beset civilization in 1000 A.D. Richard Foster Sarah Kaplan, Creative Destruction (The McKinsey Quarterly) 91The Three Levels of Innovation Transformational Substantial Incremental Source Dick Foster, Business 2.0 (05.01) Note Each level requires totally different processes! 92Jane Jacobs Exuberant Variety vs. the Great Blight of Dullness. F.A. Hayek Spontaneous Discovery Process. Joseph Schumpeter the Gales of Creative Destruction. 93Boyd 94Eglin Flag 100 AGAINST ZERO DEFECTS General, if youre not having accidents, your training program is not what it should be. You need to kill some pilots. BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 95OODA Loop/Boyd Cycle Unraveling the competition/ Quick Transients/ Quick Tempo (NOT JUST SPEED!)/ Agility/ So quick it is disconcerting (adversary over-reacts or under-reacts)/ Winners used tactics that caused the enemy to unravel before the fight (NEVER HEAD TO HEAD) BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 96Fast Transients Buttonhook turn (YF16 could flick from one maneuver to another faster than any aircraft) BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 97Blitzkrieg is far more than lightning thrusts that most people think of when they hear the term rather it was all about high operational tempo and the rapid exploitation of opportunity./ Arrange the mind of the enemy.T.E. Lawrence/ Float like a butterfly, sting like a bee.Ali BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 98F86 vs. MiG/Korea/101 Bubble canopy (360 degree view) Full hydraulic controls (The F86 driver could go from one maneuver to another faster than the MiG driver) MiG faster in raw acceleration and turning ability F86 quicker in changing maneuvers BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 99USMC COL Mike Wyly kept the enemy off-balance they knew Delta Company RVN could show up anywhere, anytime BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 100Maneuverists BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 101The stuff has got to be implicit. If it is explicit, you cant do it fast enough. BOYD The Fighter Pilot Who Changed the Art of War (Robert Coram) 102II. NEW BUSINESS. NEW TECH. 1033. The White Collar Revolution the Death of Bureaucracy. 104108 X 5 vs. 8 X 1 540 vs. 8 (-98.5) 105The coefficient of friction associated with the grunge of business is amazing! Michael Schrage 106A bureaucrat is an expensive microchip. Dan Sullivan, consultant and executive coach 107IBMs Project eLiza! Self-bootstrapping/ Artilects 108There Is No Such Thing as the Tooth Fairy. IBM Self-healing eServers Approximate TV ad copy (11.2002) 109We own all the intellectual property, we farm out all the direct labor. Jim McDonnell, VP, IBM 110Dont own nothin if you can help it. If you can, rent your shoes. F.G. 111The virtual corporation is research, development, design, marketing, financing, legal, and other headquarters functions wth few or no manufacturing capabilities a company with a head but no body. Richard Rosecrance, The Rise of the Virtual State 112Deep Blue Redux 2,240 EKGs 1,120 heart attacks. Hans Ohlin (50 yr old chief of coronary care, Univ of Lund/SW) 620. Lars Edenbrandts software 738. Only this time it matters! 113Most physicians believe that diagnosis cant be reduced to a set of generalizationsto a cookbook. How often does my intuition lead me astray? The radical implication of the Swedish study is that the individualized, intuitive approach that lies at the center of modern medicine is flawedit causes more mistakes than it prevents. Atul Gawande, Complications 114Doctors are faced with the very real threat of irrelevance in ten years. Youll go to a lab, have a blood sample drawn, and a readout of your genetic deficiencies will be producedalong with Doctors Orders for appropriate treatment only there wont be any doctor. Leading Pediatric Cardiologist (11.2002) 115Probable parole violations Simple model (age, of previous offenses, type of crime) beats M.D. shrinks. 100 studies Statistical formulas gt Human judgment. In virtually all cases, statistical thinking equaled or surpassed human judgment.Atul Gawande, Complications 116Unless mankind redesigns itself by changing our DNA through altering our genetic makeup, computer-generated robots will take over the world. Stephen Hawking, in the German magazine Focus 117Vernor Vinge/Mr. Singularity The transition time from human history to post-human singularity time, Vinge thinks, will be astonishingly shortmaybe one hundred hours from the first moment of computer self-awareness to computer world conquest.Esquire/12.2002 118N.W.O./Holy Moly Unemployment up 2 real wage growth highest since 60s productivity soaring. Source BW/02.11.2002 119E.g. Jeff Immelt 75 of admin, back room, finance digitalized in 3 years. Source BW (01.28.02) 120Everybodys Doin It! The leading Indian outsourcers reckon that the key to their long-term prosperity is bagging ever larger deals and moving ever higher up the value chain. The Economist/01.11.2003 121BW Cover/02.2003 IS YOUR JOB NEXT? A New Round of GLOBALIZATION Is Sending Upscale Jobs Offshore. They Include Chip Design, Basic Researcheven Financial Analysis. Can America Lose These Jobs and Still Prosper? 122 4. IS/ IT/ Web On the Bus or Off the Bus. 1232.5G, 3G, 4G Windows Symbian Java Bluetooth Wi-Fi PCs-PDAs-Cellphones E-business vs. M-business Etc. 124Outsiders view (1) Billions are being spent, even in a down market. (2) NOBODY HAS A CLUE AS TO WHO THE WINNERSAND LOSERSWILL BE. (3) Yet you must play. Now. Hard. Fast. 125100 square feet 126Dells OptiPlex Facility Big Job 6 to 8 hours. (80,000 per day) Parts Inventory 100 square feet. 127The Real News X1,000,000 TowTruckNet.com 128This is the first meter of a 10-kilometer race. Eventually, all markets will come to resemble todays foreign exchange market. Hamid Biglari, Head of Corporate Strategy, Citigroup, in GIGATRENDS, Wired 04.01 129Impact No. 1/ Logistics Distribution WalMart Dell Amazon.com Autobytel.com FedEx UPS Ryder Cisco Etc. Etc. Ad Infinitum. 130Autobytel 400. WalMart 13. Source BW(05.13.2002) 131If early soldiers idealized Napoleon or Patton, network-centric warriors admire WalMart, where point-of-sale-scanners share information on a near real-time basis with suppliers and also produce data that is mined to help leaders develop new strategic or tactical plans. WalMart is an example of translating information into competitive advantage.Tom Stewart, Business 2.0 132From Supply-chain Optimization To Design-chain Optimization Source Cadence Design Systems 133A Big Electronics Show Is All About Connections headline, New York Times/ 01.13.2003/ Consumer Electronics Show gt COMDEX 134NOKIA Connecting People 135NTT/DoCoMo/i-motion/remote control for your life/If Tokyo and DoCoMo are the first capitals of the wireless Internet industry, Helsinki and Nokia have been the wellsprings of mobile telephonyFinland leads the world in both Internet connections and mobile phones per capita. Source Howard Rheingold/Smart Mobs 136m-On or Out of the Loop Managers in Finland always keep their phones on. Customers expect fast reactions. And if you cant reach a superior, you make many decisions yourself. Managers who want to influence decisions of subordinates must keep their phones open. Risto Linturi, Finnish m-guru, in Howard Rheingolds Smart Mobs 137SOS Emergency Agencies Often Unable to Talk to Each Other headline, p1, USA Today/11.20.2002 138Our entire facility is digital. No paper, no film, no medical records. Nothing. And its all integratedfrom the lab to X-ray to records to physician order entry. Patients dont have to wait for anything. The information from the physicians office is in registration and vice versa. The referring physician is immediately sent an email telling him his patient has shown up. Its wireless in-house. We have 800 notebook computers that are wireless. Physicians can walk around with a computer thats pre-programmed. If the physician wants, well go out and wire their house so they can sit on the couch and connect to the network. They can review a chart from 100 miles away.David Veillette, CEO, Indiana Heart Hospital (Healthleaders/12.2002) 139All to All 140Karl Marx Meets Adam Smith Lessons from the Bush (1) Specialization-excellence. (Or death.) (2) Luck is irrelevant. (In a drought, drought specialists survive.) (3) Bigger is not necessarily better. (All hail the termites bacteria!) (4) Efficiency matches effectiveness no wasted motion, no bureaucratic B.S., very low transaction costs. (Inet does this. C.f. Dell.) (5) Hyper-interdependence. (The power resides in the network Self-organization is the rule. Inet redux. Viral marketing. Farm-out is the norm.) 141? Americans on the Web/03.2002 50,000,000 75,000,000 100,000,000 125,000,000 150,000,000 175,000,000 142157,000,000 2M/mo. Source Newsweek (03.25.2002) 143WebWorld Everything Web as a way to run your businesss innards Web as connector for your entire supply-demand chain Web as spiders web which re-conceives the industry Web/B2B as ultimate wake-up call to commodity producers Web as the scourge of slack, inefficiency, sloth, bureaucracy, poor customer data Web as an Encompassing Way of Life Web Everything (P.D. to after-sales) Web forces you to focus on what you do best Web as entrée, at any size, to Worlds Best at Everything as next door neighbor 144Jargon Bath! Bureaucracy free Systemically integrated Internet intense Knowledge based Time and location free Instantly responsive Customer centric Mass customization enabled. 145 Translation Bureaucracy free Flat org, no B.S. Systemically integrated Whole supply chain tightly wired/ friction-free Internet intense Do it all via the Web Knowledge based Open access Time and location free Whenever, wherever Instantly responsive Speed demons Customer centric Customer calls the shots Mass customization enabled Every product and service rapidly tailored to client requirements 146Message eCommerce is not a technology play! It is a relationship, partnership, organizational and communications play, made possible by new technologies. 147Message There is no such thing as an effective B2B or Internet-supply chain strategy in a low-trust, bottlenecked-communication, six-layer organization. 148Ebusiness is about rebuilding the organization from the ground up. Most companies today are not built to exploit the Internet. Their business processes, their approvals, their hierarchies, the number of people they employ all of that is wrong for running an ebusiness. Ray Lane, Kleiner Perkins 149 Read It Closely We dont sell insurance anymore. We sell speed. Peter Lewis, Progressive 150The New Infantry Battalion/ New York Times/12.01.2002 Pentagons Urgent Search for Speed. 270 soldiers (1/3rd normal complement) 140 robotic off-road armored trucks. Every soldier is a sensor. Revolutionary capabilities. Find-to-hit 45 minutes to 15 minutes in just one year. 151Theres no use trying, said Alice. One cant believe impossible things. I daresay you havent had much practice, said the Queen. When I was your age, I always did it for half an hour a day. Why, sometimes Ive believed as many as six impossible things before breakfast. Lewis Carroll 152Inet allows you to dream dreams you could never have dreamed before! 153Dont rebuild. Reimagine. The New York Times Magazine on the future of the WTC space in Lower Manhattan/09.08.2002 154HUMANAs Dreams. Emphesys Put everything on the Internet. CEO Mike McCallister, charge to 200-person outside Inet unit Imagine an ideal Web-based health insurance system and then create a product as close as possible to that vision. Start with own employees SmartSuite. Member employees Plan their own coverage and shoulder more costs. Dell is model Fully customized health for every individual. Marketing pitch for employers Buy choice for employees through a single sourceHumana. Source Fortune/05.27.2002 155Supposejust supposethat the Web is a new world were just beginning to inhabit. Were like the earlier European settlers in the United States, living on the edge of the forest. We dont know whats there and we dont know exactly what we need to do to find out Do we pack mountain climbing gear, desert wear, canoes, or all three? Of course while the settlers may not have known what the geography of the New World was going to be, they at least knew that there was a geography. The Web, on the other hand, has no geography, no landscape. It has no distance. It has nothing natural in it. It has few rules of behavior and fewer lines of authority. Common sense doesnt hold here, and uncommon sense hasnt yet emerged. David Weinberger, Small Pieces Loosely Joined 156The e-conomy is one of re-intermediation, where new technologies make it possible to radically increase complexity and efficiency with the introduction of new marketplaces. In these markets, value chains constantly reorganize as the demands of the consumer and business change. Thomas Koulopoulos, Delphi Group 157 Words to Live By Hierarchy is an organization with its face toward the CEO and its ass toward the customer. Kjell Nordstrom and Jonas Ridderstrale, Funky Business 158Hyperlinks subvert hierarchy! The Cluetrain Manifesto 159Case CRM 160Anne Busquet/ American Express Not Age of the Internet Is Age of Customer Control 161Amen! The Age of the Never Satisfied Customer Regis McKenna 162The Web enables total transparency. People with access to relevant information are beginning to challenge any type of authority. The stupid, loyal and humble customer, employee, patient or citizen is dead. Kjell Nordström and Jonas Ridderstråle, Funky Business 163Parents, doctors, stockbrokers, even military leaders are starting to lose the authority they once had. There are all these roles premised on access to privileged information. What we are witnessing is a collapse of that advantage, prestige and authority. Michael Lewis, next 164A seismic shift is underway in healthcare. The Internet is delivering vast knowledge and new choices to consumersraising their expectations and, in many cases, handing them the controls. Healthcare consumers are driving radical, fundamental change. Deloitte Research, Winning the Loyalty of the eHealth Consumer 165Welcome to D.I.Y. Nation Changes in business processes will emphasize self service. Your costs as a business go down and perceived service goes up because customers are conducting it themselves. Ray Lane, Oracle 166Psych 101 Strongest Force on Earth? My need to be in perceived control of my universe! 167UBIQUITY! Its the cars, not the tires, that squeal NYT/Circuits/10.25.01) E-ZPass (6M in NE), tests with McDs, gas stations and parking lots next. OnStar (GM/1.5M). Plus black boxes, GPS (the case of the 450 ticket), CA smog offenders. 168CRM has, almost universally, failed to live up to expectations. Butler Group (UK) 169No! No! No! FT The aim of CRM is to make customers feel as they did in the pre-electronic age when service was more personal. Rebuttal (1) Service sucked in the pre-electronic age. (2) NewGen believes in the screen! (So do I.) 170One Persons Opinion TP to reporter Service is MUCH better! Would you go back to bank tellers and phone operators? Value that I place on a smile 3 on a scale of 10. Value I place on fast accurate digital response 11 on a scale of 10!! 171M. Rogers -5 defections 25 to 85 profit. Lose 15 to 35 p.a. 69 defect as a result of lousy sales or service experience. (Q But is this the point???? A Yes. No.) 172CGEY (Paul Cole) Pleasant Transaction vs. Systemic Opportunity. Better job of what we do today vs. Re-think overall enterprise strategy. 173Message CRM Madness 600 CRM vendors. ??? Do it all or do something. Past over-invest in low-value customers. Idea better experience, not off-load work to customer. Relationship f(dialogue knowledge duration). Key new attitudes, DESTRUCTION of functional barriers to info action. 174Wells Fargo (285B) Master of BC 900M since 99. 3M. 1/3rd of chk acct customers on line. 5,400 branches 4 of 5 who do product research on line purchase at branch. Wire transfer, save 30 17 less calls. Material diff to bottom line. Source BW Online (03.20.02) 175Here We Go Again Except Its Real This Time! Bank online 24.3M (10.2002) 2X Y2000. Wells Fargo 1/3rd 3.3M 50 lower attrition rate 50 higher growth in balances than off-line more likely to cross-purchase happier and stay with the bank much longer. B of A 4M of 15M ( way beyond the early adopters). Source The Wall Street Journal/10.21.2002 176 The Cluetrain Manifesto 177Hyperlinks subvert hierarchy! The Cluetrain Manifesto 178Corporate Resistance to It It all goes back to fear of losing control! The Cluetrain Manifesto 179E-business is the final nail in the coffin for bureaucracy at GE. Jack Welch/ GE Annual Report 2000 180 Words to Live By Hierarchy is an organization with its face toward the CEO and its ass toward the customer. Kjell Nordström and Jonas Ridderstråle, Funky Business 181 Richard Rosecrance, The Rise of the Virtual State Wealth and Power in the Coming Century 182Hong Kong Prototypical Virtual State 83 Service 8 Mfg. Source Richard Rosecrance, The Rise of the Virtual State 183The new dependence on productive assets located within someone elses state represents an unprecedented trust in the integrity and peacefulness of strangers. In its pure form an ideal model toward which many states are tending the virtual state carries within it the possibility of an entirely new system of world politics. Richard Rosecrance, The Rise of the Virtual State 184Imagine a world where a citizen could search the globe to assemble my government, the ultimate in customized, customer-centric services. Health care from the Netherlands, business incorporation in Malaysia Don Tapscott 185The virtual corporation is research, development, design, marketing, financing, legal, and other headquarters functions with few or no manufacturing capabilities a company with a head but no body. Richard Rosecrance, The Rise of the Virtual State 186We own all the intellectual property, we farm out all the direct labor. Jim McDonnell, VP, IBM 187Is There a There There The Ericsson Case 1. 50 Mfg to Solectron/Flextronics 2. Substantial RD to India 3. Division for licensing technology 4. JV with Sony on crown jewel handsets 5. Net a wireless specialist that depends on services more than manufacturing, on knowledge more than metal Source BW/11.04.02 188The Futility of Size Regarding this issue the new process of virtualization fully exerts itself. Virtualization is the recognition that territorial size does not solve economic problems. Economic access must become the substitute for economic domain. Richard Rosecrance, The Rise of the Virtual State 189TP Skill at creating, exploiting, and exiting crucial alliances beats ownership of fixed assets. 190At the ultimate stage, competition among nations will be competition among educational systems, for the most productive and richest countries will be those with the best education and training. Richard Rosecrance, The Rise of the Virtual State 191Whats the Common Denominator? The Dutch the British the Rothschilds Cargill Sumitomo the KGB the CIA Mossad Enron WalMart McKinsey FedEx UPS Mr. Speaker Henry Kissinger Executive secretaries the Corner Grocer Women-in-general? 192Masters of information acquisition, manipulation, dissemination, and utilization. Networkmeisters. Agile. Temporary. Virtual is thy name. Motto Applied information is power/wealth. 193III. NEW BUSINESS. NEW VALUE PROPOSITION. 1945. The PSF Solution The Professional Service Firm Model. 195So what will be the Basic Building Block of the New Org? 196Every job done in W.C.W. is also done outside for profit! 197Answer PSF! Professional Service Firm Department Head to Managing Partner, HR IS, etc. Inc. 198TP to NAPM You are the Rock Stars of the B2B Age! 199Message You are Re-invention Evangelists! 200Chicago November 1999 HRMAC 201 support function / cost center / bureaucratic drag or 202 Are you Rock Stars of the Age of Talent 203Sarah Daddy, what do you do? Daddy Im a cost center. 204P.S.F. Summary H.V.A. Projects (100) Pioneer Clients WOW Work (see below) Hot Talent (see below) Adventurous culture Proprietary Point of View (Methodology) W.W.P.F. (100)/Outside Clients (25) When Now! 205BMWs Designworks/USA gt50 from outside work 206Bill of (SELECTIVE) Rights YOU HAVE THE RIGHT TO CHOOSE YOUR CLIENTS! (Wanna be-stay-get COOL Work With Cool Clients!) (YOU ARE YOUR CLIENT LIST.) (LIFE IS TOO SHORT TO WORK WITH JERKS.) (Mass marketers TARGET INNOVATION. E.g. African-Americans Hispanics the Aging Population Greens Women) 207Culture Change is not Corporate. Culture Change is not a Program. Culture Change does not take Years. Culture Change does not start Today. Culture Change starts Right Now! Culture Change Lives in the Moment! Culture Change is Entirely in Your Hands! 208What Do I Do First? One Minute Excellence! Thomas Watson 209C.I.O. to C.E.F.R.N.S. 210Chief Evangelist For Really Neat Stuff 211G.M. The Recruitment and Development of Top Talent. Period! V.C. Bets on Talent. Bets on Projects. Period! 212 Dept. Head I Sports G.M. Dept. Head II V.C. 213eHR/PCC All HR on the Web Productivity Consulting Center Source E-HR A Walk through a 21st Century HR Department, John Sullivan, IHRIM 214 Model PSF 215 (1) Translate ALL departmental activities into discrete W.W.P.F. Products. (2) 100 go on the Web. (3) Non-awesome are outsourced (75??). (4) Remaining Centers of Excellence are retained leveraged to the hilt! 216Typically in a mortgage company or financial services company, risk management is an overhead, not a revenue center. Weve become more than that. We pay for ourselves, and we actually make money for the company.Frank Eichorn, Director of Credit Risk Data Management Group, Wells Fargo Home Mortgage (Source sas.com) 217The PSF Problem Professionalism Arrogance Pseudo-science. Hear no evil, see no evil, dont rat out your peers Docs, Teachers, Clergy (Law), Accts (Berardino) 218Everybodys Doin It! The leading Indian outsourcers reckon that the key to their long-term prosperity is bagging ever larger deals and moving ever higher up the value chain. The Economist/01.11.2003 2196. The Heart of the Value Added Revolution PSFs Unbound/ The Solutions Imperative. 220Base Case The Sameness Trap 221Companies have defined so much best practice that they are now more or less identical. Jesper Kunde, Unique now or never 222 While everything may be better, it is also increasingly the same. Paul Goldberger on retail, The Sameness of Things, The New York Times 223When McDonalds first started exporting its formula of quality, cleanliness and service, it was something of a novelty. These days, quality, cleanliness and service are a givenand people are becoming more interested in what they are eating. FT/12.21.2002 224We make over three new product announcements a day. Can you remember them? Our customers cant! Carly Fiorina 225The surplus society has a surplus of similar companies, employing similar people, with similar educational backgrounds, coming up with similar ideas, producing similar things, with similar prices and similar quality. Kjell Nordström and Jonas Ridderstråle, Funky Business 226Funky Business To succeed we must stop being so goddamn normal. In a winner-takes-all world, normal nothing. 227When we did it right it was still pretty ordinary. Barry Gibbons on Nightmare No. 1 228 Customers will try low cost providers because the Majors have not given them any clear reason not to. Leading Insurance Industry Analyst 229SWA gt American Continental Delta Northwest United USAirways. Source Boston Globe (12.22.2001) 230Getting Beyond Lip Service! No longer are we only an insurance provider. Today, we also offer our customers the products and services that help them achieve their dreams, whether its financial security, buying a car, paying for home repairs, or even taking a dream vacation.Martin Feinstein, CEO, Farmers Group 231The Internet is the most effective profit-killer on earth it stimulates a TRUE FREE MARKET and a real free market is the most dangerous of marketplaces for companies selling the SAME OLD STUFF. To those with COURAGE, free markets are greatthey help kill off the deadwood competitors who dont have the courage to changemaking way for them to LEVERAGE their DRAMATIC DIFFERENCE into profitable growth.Doug Hall 232Everybodys Doin It! The leading Indian outsourcers reckon that the key to their long-term prosperity is bagging ever larger deals and moving ever higher up the value chain. The Economist/01.11.2003 233The Big Day! 23409.11.2000 HP bids 18,000,000,000 for PricewaterhouseCoopers consulting business! 235These days, building the best server isnt enough. Thats the price of entry. Ann Livermore, Hewlett-Packard 236Gerstners IBM Systems Integrator of choice. Global Services 35B. Pledge/99 Business Partner Charter. 72 strategic partners, aim for 200. Drop many in-house programs/products. (BW/12.01). 237You are headed for commodity hell if you dont have services.Lou Gerstner on IBMs coming revolution (1997) 238 Service-Systems Paradox Cut Grow Automate 75 of commodity service activities and/but Add value via people-intensive strategic/systems-integration activities (E.g. Could Suns service/sysint business be 60 of revenues?) (Hiring from PWC, etc.) 239ATT President David Dorman Back to long distance but with bundles of lucrative corporate services for the likes of Merrill Lynch, MasterCard, Hyatt. Consumer Dump 25M subscribers (50)hold on to high enders. Source BW/05.20.2002 240Is There a There There The Ericsson Case 1. 50 Mfg to Solectron/Flextronics 2. Substantial RD to India 3. Division for licensing technology 4. JV with Sony on crown jewel handsets 5. Net a wireless specialist that depends on services more than manufacturing, on knowledge more than metal Source BW/11.04.02 241We want to be the air traffic controllers of electrons. Bob Nardelli, GE Power Systems 242Customer Satisfaction to Customer Success Were getting better at Six Sigma every day. But we really need to think about the customers profitability. Are customers bottom lines really benefiting from what we provide them? Bob Nardelli, GE Power Systems 243Keep In Mind Customer Satisfaction versus Customer Success 244Was Big Iron Transformer Dudes Division. Is Air Traffic Controllers of Electrons. 245Was Bunch of Guys Who Make Circuit Breakers Division. Is GE Industrial Systems. 246GEs New Six Sigma Approach Old view Out of service 9 days. 4 days are transport, which is client responsibility. New view ALL 9 DAYS ARE OUR RESPONSIBILITY! Why? 9 days Clients World. Source Steve Kerr, VP, GE 247E.g. UTC/Otis Carrier boxes to integrated building systems 248Leased AC Units of Coolth 249Nardellis goal (50B to 100B by 2005) move Home Depot beyond selling goods to selling home services. He wants to capture home improvement dollars wherever and however they are spent. E.g. house calls (At-Home Service 10B by 05?) pros shops (Pro Set) home project management (Project Management System a deeper selling relationship). Source USA Today/06.14.2002 250A little-known fact Siemens is now the worlds largest application service provider to the health business. Digitally stored X rays, recordkeeping, the cameras that guide surgeons in the operating theaterall run on Siemens software Forbes/09.16.2002 E.g. Siemens is giving Health South an all-digital hospital of the future. 251UPS wants to take over the sweet spot in the endless loop of goods, information and capital that all the packages it moves represent. ecompany.com/06.01 (E.g., UPS Logistics manages the logistics of 4.5M Ford vehicles, from 21 mfg. sites to 6,000 NA dealers) 252New Springs Turnkey Flexible sourcing. Collections. Packaging. Merchandising. Promotion. Systems Site mgt. 253 No longer are we only an insurance provider. Today, we also offer our customers the products and services that help them achieve their dreams, whether its financial security, buying a car, paying for home repairs, or even taking a dream vacation.Martin Feinstein, CEO, Farmers Group 254Our mission is to go from being the worlds premier timesharewhich is a large idea in a small industryto being what we call the market makers for global travel and leisure. We need to enable developers to be involved in more travel and leisure products, rather than just the timeshare side.Ken May, RCI (Source Developments) 255VISIONS OF A BRAND-NAME OFFICE EMPIRE. Sam Zell is not a man plagued by self doubt. Mr. Zell controls public companies that own nearly 700 office buildings in the United States. Now Mr. Zell says he will transform the real estate market by turning those REITs into national brands. Mr. Zell believes clients will start to view those offices as something more than a commodity chosen chiefly by price and location. New York Times (12.16.2001) 256 Architecture is becoming a commodity. Winners will be Turnkey Facilities Management providers. SMPS Exec 257We are a real estate facilities consulting organization, not just an interior design firm. Jean Bellas, founder, SPACE (from SMPS Marketer) 258Omnicom 57 (of 6B) from marketing services 259Who was the number one employer of architecture school grads in the U.S. last year? 260Message Eat Or Be Eaten. 261HP. Sun. IBM. GE/PS. GE/IS. (GE/AE. GE/MD.) UTC. Farmers. Delphi. UPS/ FedEx/ Ryder. Springs. Omnicom. IDEO. Accenture. Equity Office Properties. RCI. Etc. Etc. 262Words Partners Value Added Intellectual-capital Added Consultative-skills Added Implementation Added Model PSF Outsourcing (??) Acquisitions-led (Omnicom et

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